Too polite to disrupt? How Canada can build Valley North

The Canadian reputation for politeness is renowned. It could also be holding us back from developing a tech ecosystem.

With the federal government promising a bold national innovation agenda, #RBCDisruptors — a monthly series — turned the spotlight this week on Canada’s current state and how the Great White North stacks up against Silicon Valley and other hotspots of disruption. Tax policy, immigration, education and venture capital were all mentioned. But culture was tops for the three guests: Michelle Zatlyn, the Canadian cofounder of CloudFlare, a Silicon Valley star in cyber-security; Dan Debow, a serial entrepreneur from Toronto; and Angela Strange, a partner at venture capital powerhouse Andreessen Horowitz.

“Canadians like winning,” Strange said. “We do it nicely. But we don’t tout our wins, so no one knows we win and success can’t beget success.”

Here are five takeaways from the conversation on Canada versus Silicon Valley:

1. The meek won’t disrupt the Earth

Canada needs to be bold. Strange, who is also a member of the Trudeau government’s economic growth council, said Silicon Valley is full of entrepreneurs promising to change the world, no matter how preposterous their ideas may seem.

Debow, an active entrepreneur who has raised nearly $300 million through the sale of his companies, said Canada prides itself on a culture of being reasonable. “All progress requires unreasonable people. Being polite means we don’t confront the truth that something isn’t good for a customer, that a product isn’t good enough.”

Any culture that is innovative, he said, is by its nature discomforting, because the great ideas and companies that change the world often require accepted wisdom to be challenged. That means taking risks, challenging authority, and not waiting around for government to catch up. “The crucible of good ideas is often conflict,” Debow said.

Strange said Canada is catching up when it comes to big promises — and the money won’t be far behind. “We’re seeing more Canadian unicorns and more Canadian startups,” she said. “It’s a belief that you can start something that can become a global leader in a large industry, that’s really here.”

2. The key to success is success

Zatlyn, who co-founded the cybersecurity company CloudFlare after graduating from Harvard Business School, said Canada lacks the fairytale stories of Silicon Valley, where unknowns can spin technology into gold. That makes investors more likely to take a chance on early-stage companies, she said. “The ecosystem here, when people have no idea who you are, I don’t think is quite at the same level it is in the Valley.”

The Valley is also loaded with people who know how to grow companies — a very different skill from starting them, or running them once they’re big. Think of Employee #20, a person who can slide into a start-up that’s bursting at the seams and take on its growing challenges, from marketing to product enhancement to finance.

It’s about money as well as talent. Debow said such an environment thrives when successful entrepreneurs pay it forward — investing the money they make selling their companies in the next generation of companies. “Success begets success,” he said, a line attributed to Wayne Gretzky’s view that one Stanley Cup convinced the Edmonton Oilers they wanted to win a lot more.

Debow said he remembers his first trip to the Valley, driving down the highway and seeing that every office building held tech companies — and only tech companies. The likes of Apple and Google created an ecosystem unlike any other in the world, including accountants, lawyers and investors who had tasted success and had a bigger appetite for risk.

“They’ve seen crazy ideas turn into real companies,” he said. “That creates an environment where crazy ideas are embraced, and some of them turn into Facebook, Google, CloudFlare.”

3. It’s time to double down on human capital; financial capital will follow

All three agreed Canada has more than enough human capital to build the startups that change tomorrow’s world. Strange said the Toronto-Waterloo corridor is a huge growth area for tech companies, in part because of its strong universities and diverse populations. “We have the talent, we have the appetite for risk. The percentage of Canadian-based entrepreneurs that we see has gone up significantly, so I suspect that we will have a pretty big-stake investment here in the next little while.”

Online marketplace provider Shopify and messaging service Slack are two examples of Canadian success stories, she said, and there are many more that have moved to the United States when it came time to grow.

“Toronto has come a huge, long way,” added Debow. “I think the cheerleading is happening more, people are investing more. But it just takes time.”

Zatlyn agreed, pointing out that Silicon Valley had a 60-year head start. “It’s not a zero-sum game. More and more people are working to move it forward, and I think that’s good for us.”

4. Big companies can help

While it’s easy for Canada’s startups to jump on innovative ideas, the same can’t always be said for the large companies that dominate the Canadian economy. Debow said that in order to keep up with the competition and avoid disruption, Canada’s big companies need to experiment with different ideas and not be afraid to spend time and resources on ideas that don’t work out. “Teams need to be allowed to spend time on new ideas, many of which won’t work,” he said. “You should be trying things first, doing things differently.”

Debow pointed to large American companies that tend to invest more in the success of their suppliers, as those suppliers can then help the bigger companies innovate.

Strange added that large companies need to take risks, be open to criticism, and celebrate new ideas when they make things better, no matter how small the improvement. When she was previously at Google, where she helped build the mobile version of the company’s Chrome web browser, Strange said even mundane improvements were celebrated. “It helps people realize that these really small wins are super important. Maybe it’s only 10 per cent, but 10 per cent here and there can quickly add up.”

She added that large companies supporting and working with startups is another way to bring innovation on board, and not just through corporate venture capital. “It’s about cooperation, it’s about the large companies and the startups working together. It’s about the full stack of the ecosystem working together, that’s how you build a thriving ecosystem.”

Zatlyn said big companies can open up their procurement practices and do more to focus on problems and solutions, not processes. “That’s how you get interesting solutions,” she said.

5. Expect the unexpected

One thing is clear from the digital revolution, Debow said: investment in innovation isn’t optional. “Software is eating the world,” he said, echoing the title of a landmark essay by Marc Andreessen.

Debow pointed out that computing power is still doubling roughly every 18 months, despite the fact that computer engineers now bumping up against the limits of quantum mechanics. That has big implications for any business that deals with data, any business that deals with customers, any business that is looking for efficiencies.

He pointed to the airline industry, which some may think is free to fly above the digital clouds. Think again, Debow said. Virtual reality may soon show business travelers they never need to fly again, at least for business.

With that in mind, we shouldn’t view technology as a sector; it’s a key part of every business. The push for innovation ‘’is not just about building a tech industry,” Debow said. “It’s about taking every one of our industries and figuring out how we can reinvent them using software, computing, and better distribution models.”